Japanese beer market is the world’s fourth largest market after the US, Germany and China. Beer is considered to be a king in Japan accounting for over 70 % of all alcohol sold; while, contrary to common western belief, traditional sake is only second most consumed alcoholic drink in Japan with 14% market share. Despite being one of the largest markets in the world, development of the market has been rather unpredictable. Until 2001, the beer market has been shrinking mainly due to changing tastes, healthier lifestyles and declining population of beer drinkers.
On the positive side is the fact that for the first time in the last five years there has been 1. 1% increase in consumption. For many years, Japanese beer market has been dominated by four main breweries – Kirin, Sapporo, Asahi and Santory – that were competing more over the packaging rather than product. Early attempts to differentiate the product by introducing new unusual tastes have failed; and “packaging wars” did not make any significant changes in the relative positions of competitors.
In 1980s, Kirin Beer had the biggest share of the Japanese beer market. Leading position was achieved through implementation of a successful market strategy emphasizing distribution, production and brand as three competitive factors. At that time, market dominance of Kirin was so strong that the company could even set market prices on all domestic beer sold in the Japanese market. Kirin? s highly favorable cost position allowed to produce beer at a rather low costs and still enjoy strong profitably; while other breweries could hardly cover their production costs.
While being the market leader and believing that “real beer taste” produced by Kirin was exactly the taste that consumers wanted, the company was somewhat slow to identify that preferences of new Japan’s beer drinkers have shifted towards “sharp, clean and more defined taste”. Kirin? s early reluctance to turn into a more diversified alcohol company came at a rather high cost – loss of its top position to Asahi in 2002 . Even though Kirin is one of the biggest multinational companies, and was ranked as 4th largest selling beer brand worldwide, currently it has a second position in the Japanese beer market .
It was difficult to imagine that anyone, domestic or foreign brewer, could take away Japan? s brewing crown from Kirin. With its dominant national distribution system consisted of 100,000 distributors and retailers, strong financial position to expand production capacity nearly every two years, maximum benefit from economies of scale and low cost production process, the company seemed to be in a very secure position. Almost magical rearrangement of leaders happened after introduction of a new “Super Dry Beer” produced by Asahi (though it took Asahi more than a decade to get the leading position). Consumers? eaction on the new product was phenomenal – acceptance of a new taste was so large that Super Dry became #1 beer in Japan which led to an impressive growth of Asahi? s market share from 10% to 25% within first three years. During next fifteen years Super Dry brand was seen as unstoppable, until it finally defeated in summer 2001. One question that comes to mind is that how Asahi was able to create a new taste that so well reflected preferences of consumers. Perhaps without being pressured by cost and decreasing profitability, the company would not even take a decision for “frontal attack” to win a larger market share from Kirin.
After asking customers for the first time in decades, Asahi found out that new generation drinkers would be interested in the new kind of beer with “smooth but sharp “taste. Working in close cooperation Asahi? s marketing and production staff were able to develop a new taste that they thought was accurately reflecting customers? description of a taste they wanted to try. Impressive growth of Asahi Super Dry beer could also be partially attributed to Kirin? s delay in responding to the market development and changes in customers? tastes.
Success of Super Dry very soon was followed by a number of new development processes carried out by Asahi? s competitors, which resulted in introduction of new beers in the market. Described above market situation refers back 1990s. Since then, beer market has seen even further transformation. Here is a more up-to-date picture of the market, featuring current positions of two main beer producers. Overall future of the beer looks tough as four main brewers are experiencing overall decline in business performance. There has been a drop in sales and yet new shift in customers? references. Effective competing approaches are no longer a matter of differentiation of regular beer but increasing a variety of low-alcohol products. Recently new low- malt beer – Happoshu become very popular. In 2003 its market share already accounted for 30% of the beer market. Its popular appeal is based on heavy marketing and the lower price (about ? the price of standard alcoholic beer) . A new, low alcohol beverage looks, smells and tastes almost like beer but legally it is not beer due to its composition of ingredients. It has already become one of the most onsumed drinks in Japan. Asahi was very fast to respond to the new trend by introducing Asahi? s happoshu to the market earlier than its main competitor Kirin. Reasonably tasting and cheaper alternative to standard beer indicated that Japanese beer drinkers traded taste for price, meaning that as long as volume of happoshu increases, the share of a standard beer will continue to fall. Though there is a big probability that revision of taxation on happoshu will lead to a tax increase on the product. Another current trend in Japanese market is premium beer.
According to the market research, future of Japan? s beer market is expected to polarize – with consumers choosing either affordable happoshu or high class premium beer. Even though more costly process of making premium beer results in 10-20% higher prices than for normal beer, sales of premium beer are on the rise. It seems that sales of ordinary beer have reached its peek while sector for premium has more potential. Currently, sales of premium beer account for 7% of the market share. In additional to premium beer, seasonal brands are becoming increasingly popular.
As much as dozen of new “seasonal” tastes are launched for a few months at a time to meet diverse consumers? tastes. Understanding that concentrating on the beer production only is rather risky in given market situation, four biggest brewers have taking steps to diversify their product portfolio. Two main Japanese brewers – Kirin and Asahi have following positions:Kirin has 15 breweries throughout Japan, but apart from that it has also expanded into restaurants, food services including baby food, transportation, engineering, building management, flowers, pharmaceuticals and medicine.
Kirin vastly expanded scope includes drinks such as tea, coffee, wine, spirits and soft drinks. The company was able to increase income by cutting costs of sales and general administrative expenses. Asahi is currently 4th largest beer brand in the world and has operations in nearly 40 countries around the world. Only in Japan there is a network of 90 sales offices. The company was able to expand through mergers and acquisitions, increasing product portfolio that currently includes spirits, liqueurs, and other cod beverages.
Almost 10% of its sales come from real estate business, restaurants, wholesaling and distribution. While Asahi has higher sales than Karin, the profits of the company are lower than Kirin? s. It has to do with high general administrative costs, large expenditures on aggressive promotions and advertisement of new products. Table below gives slightly better idea of the business structure of Kirin and Asahi. Alcoholic beverage BeveragesFood and medicalOther businessKirin67. 5 %21. 7%3. 1%7. 7%Asahi76. 9%12. 6%1%9. 5%Having described current situation in the Japanese market, it would be important to think about possible solutions that would help Asahi maintain its current position and also make some suggestions on how Kirin could improve its position in the Japanese market. As possible options for further development, both companies could consider following:•New Product development (NPD). Change in lifestyle and habits resulted in many consumers moving away from ordinary, high in calories and carbohydrate beer to more healthy beer variants.
In response to this new market tendency, companies have already been working on the development of healthier beer alternatives, like happoshu for example. However, continuing to work on further NPD would certainly be beneficial for both, Asahi and Kirin. Companies could think about some sort of new generation beer that would be free from carbohydrates and /or focus more on low-alcohol beverages. Referring to growing popularity of premium beer, it would also be important to evaluate closer premium alcohol segment in terms of attractiveness and profitability. New features for already existing products. Considering rapid changes in customers? tastes, it is always important to launch new products to entice Japanese consumers. Asahi and Kirin have to be innovative, and consider a bit larger spectrum of new markets and market segments while looking for new business opportunities. Of course, it would be difficult to diversify further already existing products. However, higher customer interest could be generated by new packaging, for example, especially limited edition or produced for special occasions or important events . •New potential markets.
China, being already 3rd world’s top beer selling market should be looked at as a place for further expansion. Entry strategy for this market could be joint ventures with local Chinese brewers. •Strengthening existing sales through large-volume retailers and creating new channels for distribution through convenience stores. Thinking of suggestions for each company individually, following ideas come to mind. Asahi – should work further on strengthening its operations as alcoholic beverage manufacturer. High value of the brand would help in introduction of new products into the market.
Plus, focused promotions and aggressive advertising would ensure the success of new products. The company was able to achieve success by focusing on one product – Super Dry. Considering that biggest part of brand recognition came with introduction of this product, the company should think of ways how to shift core brand associations from the product that is no longer a leader to newly developed products. The way the company can try to repeat the success it had with one single product is through implementation and integration of highly- focused marketing.
Asahi does have a previous experience in formulating activities and organization of entire company around one product only, so it could follow the same model. And last but definitely not least, Asahi should also focus on increase of profits and level of efficiency. For Kirin it would be recommended to concentrate on more extensive range of products that play an important role in the consumers’ lifestyles and have a natural value. The company could consider expanding further their pharmaceutical line, food products including low-alcohol or alcohol free drinks, etc.
Introduction of new products into the market could then be done through existing distribution channels. Excellent sales organization of Kirin could be advantageous in selling new products. In order to take greater advantage of its distribution network, the company could move from centralized to regional level of control of its distribution network. First of all, the number of branches would need to be expanded, and then place regional offices in charge of distribution and overseeing activities of regional branches.
By switching control and administration activities from central to regional offices, response time would be faster, plus, more focus would be given to activities relating to supplying regional large-volume retailers with products. Another advantage of such restructuring of channels would be higher level of efficiency of the distribution network. Low manufacturing costs is one of the main strengths of the company, and, fortunately for Kirin, cannot be easily copied by other competitors. In view of that, Kirin should use its excellent competitive position as a low-cost beer manufacturer to achieve even greater profitability.
ConclusionIn the severe business competition over the market share for beer, two major brewers – Asahi and Kirin have to be very fast in responding to continuously changing consumers? tastes and new market trends. As companies will continue their battle for leading position, they should also be open about considering new business opportunities that could be found in another markets (China, US) and new market segments (alcohol free beverages, baby food) or sectors (pharmaceutical, real-estate, wholesaling). References1. http://www. axxium. com “Maxxium and Asahi Breweries forge Strategic Alliance”,2. http://www. japanvisitor. com “Today’s Kirin”, Vinh T. Phung3. http://www. iht. com “Foreign Beers Win Fans in Japan”, by David Tracey, April 10, 19954. http://www. euromonitor. com “Japan, 2001 a beer oddity”, Ian Bell, August 7, 20025. http://www. lewrockwell. com“Beer War”, Mike Rogers, February 26, 20056. http://www. iht. com “Japanese beer faces woes despite revival”, August 14, 20067. http://www. japan-zone. com “Alcohol”Date of download is 04. 07. 2007.